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Attachment 4 ^ <br /> Rating Agency Methodology Updates ORANGE COUNTY <br /> NORTH CAROLINA <br /> S&P Fitch <br /> • On September 12, 2013, Standard & Poor's updated its US Local ■ On April 18, 2016, Fitch updated its US Tax-Supported Rating <br /> Governments General Obligation Ratings methodology and Criteria. <br /> assumptions. <br /> • Under the new methodology, Under the new methodology, Fitch has identified four key rating <br /> gy, an initial indicative rating is <br /> calculated from a weighted average of seven key factors: factors that play a significant role in driving the rating outcome for <br /> a given issuer in the context of its economic base: <br /> US Local Governments General Obligation Ratings Methodology Key Rating Factors <br /> 1. Institutional Framework 10% 1 Revenue Framework <br /> Legal and practical environment in which the local govt operates Growth Prospects for Revenues Without Revenue-Raising Measures <br /> 2. Economy 30% Independent Legal Ability to Raise Operating Revenues Without External Approval <br /> Total Market Value Per Capita <br /> Projected per capita effective buying income as a %of US projected 2 Expenditure Framework <br /> effective buying income Natural Pace of Spending Growth Relative to Expected Revenue Growth <br /> 3. Management 20% Flexibility of Main Expenditure Items <br /> Impact of management conditions on the likelihood of repayment 3 Long-Term Liability Burden <br /> 4. Budgetary Flexibility 10% Combined Burden of Debt and Unfunded Pension Liabilities in Relation to Resource Base <br /> Available Fund Balance as a %of Expenditures <br /> 5. Budgetary Performance 10% 4 Operating Performance <br /> Total Government Funds Net Result(%) Financial Resilience Through Downturns <br /> General Fund Net Revenue Budget Management at Times of Economic Recovery _ <br /> 6. Liquidity 10% <br /> Total Gov't Available Cash as a %of Total Gov't Funds Debt Service <br /> Total Gov't Cash as a %of Total Gov't Funds Expenditures ■ The factors cover both the institutional framework in which an <br /> 7. Debt and Contingent Liabilities 10% issuer operates, which varies by level and location of government, <br /> Net Direct Debt as a %of Total Governmental Funds Revenue and performance within that framework. <br /> Total Governmental Funds Debt Service as a %of Total <br /> Governmental Funds Expenditures ■ Fitch publishes specific rating category evaluations for each factor, <br /> with analysis focused on long-term trends and expectations. <br /> ■ Up to a one-notch adjustment can be made from the indicative <br /> rating based on other qualitative factors. <br /> DAVENPORT 8L COMPANY <br /> June 13,2017 Orange County, NC 6 <br />